At the start of the third decade of the 21st century, it is no longer acceptable for companies operating in either developed or emerging markets to ignore the risks posed by environmental, societal or governance (ESG) issues.
For example, the Deutsche Bank Research paper, Climate Change and Corporates: Past the Tipping Point with Customers and Stockmarkets (September 2019),1 reported that customers can quickly lose their loyalty to a brand they feel has disappointed on an issue that is important to them. Just as companies must move with the times on the products and services they provide, they also need to be aware of how their customers’ sentiment towards a broader range of issues is shifting too.
For decades, while consumers might have intended to purchase more climate-friendly products, they generally failed to do so. This inertia is now disappearing. In the 12 months preceding the report’s publication, the number of UK consumers choosing to purchase from companies they regarded as active on the issue of climate change outstripped those who did not by two to one. The US showed a similar pattern.
Importantly, this is not a class or income issue; whether a company’s products are premium or bargain basement seems to be largely irrelevant. “It doesn’t matter if a firm’s products are high-quality, low-cost, or B2B,” found the research. It also noted that this trend is evident in consumer boycotts. Historically, these events have rarely dented corporate revenues, but this is changing. About one in three consumers have stopped buying a product from a company they “really liked” after it attracted bad press on its environmental record.
Figure 1: Millennials as consumers